Decades Of Failed Promises From Verizon: It Promises Fiber To Get Tax Breaks... Then Never Delivers

from the this-again? dept

A decade ago, we wrote about how Verizon had made an agreement in Pennsylvania in 1994 that it would wire up the state with fiber optic cables to every home in exchange for tax breaks equalling $2.1 billion. In exchange for such a massive tax break, Verizon promised that all homes and businesses would have access to 45Mbps symmetrical fiber by 2015. By 2004, the deal was that 50% of all homes were supposed to have that. In reality, 0% did, and some people started asking for their money back. That never happened, and it appeared that Verizon learned a valuable lesson: it can flat out lie to governments, promise 100% fiber coverage in exchange for subsidies, then not deliver, and no one will do a damn thing about it.

Because here we are about a decade later, and basically the same damn thing has happened in New York City. At least this time, Verizon actually had a fiber service to offer -- the well-known FiOS -- which it "promised" to cover 100% of NYC by 2014. Back when that was announced in 2008, Karl Bode at BroadbandReports correctly warned that you should take that promise with a large grain of salt, both because of Verizon's past failures to live up to promises, as well as the loopholes hidden in the agreement.

It looks like he was right on both accounts. As the account (linked above) at the Verge notes, the language actually is that Verizon just needs to "pass all households," which is interpreted loosely:

There were a lot of caveats in the contract, however. Verizon is only required to "pass all households," a vague term that means the fiber need to extend "to a point from which the building can be connected to the network." Verizon is not obligated to make that connection, however. As a result, the company is now claiming around 75 percent accessibility, even though the number of New Yorkers who can actually sign up for FiOS is probably much lower. A study by public advocate Bill de Blasio concluded that just 51 percent of households in New York have fiber access. The city and Verizon dispute these figures.

Verizon is blaming landlords, but as the Verge points out, when someone made a big stink on the radio recently about the lack of FiOS in his apartment, Verizon contacted him the very next day, and had service at his apartment within 3 weeks. The simple fact is that Verizon has been trying its damnest to get out of the wired business altogether. Back when Ivan Seidenberg was in charge, he made a giant bet on fiber, which is why Verizon became such a national leader in broadband with FiOS -- a service that people really seem to love. However, Wall Street has always hated it, because it's capital intensive, and Wall St. recognizes that without any real competition in the broadband space, Verizon can avoid investing in such infrastructure upgrades, and just swim in larger profits while America's broadband infrastructure suffers and falls further and further behind other countries. Once Seidenberg left, the beancounters quickly took over and looked for ways to stop all that investment. Why invest in the future if there are no competitors to push you to do so?

The fact that Verizon had made this big deal with NYC? Well, Verizon knows it doesn't need to care because it doesn't appear that the NYC government cares at all. The most telling part of the article at the Verge is this tidbit:

The city seems satisfied with how Verizon has held up its end of the bargain. When asked whether Verizon had met its contract obligations, the mayor’s office first asked The Verge what Verizon had said, then referred us to DOITT [the Department of Information Technology and Telecommunications], which actually has the contract. DOITT referred us to the mayor’s office. When told that the mayor wasn’t commenting, DOITT suggested we speak with Verizon. When pressed, a spokesperson said, "We just don’t have anything to add here."

Re: Re: Re: In light of this failure, what's your solution?

Re: In light of this failure, what's your solution?

You seem to be living in a fantasy world: it has nothing to do with (lack of) regulation, it has to do w/ pols currying favor with those that support them. The problem is *NOT* regulators (look up "regulatory capture"), the problem is the people you elect to office who are utterly corrupt and tell regulators to look the other way.

Re: Re: In light of this failure, what's your solution?

Regulation isn't the problem because the regulation is broken by the corruption of our political system?

The circumvention of regulation due to corrupt former officials who worked to limit the power of regulation while in office are given sinecure roles where they can work to further limit the power of regulation doesn't cause a de facto lack of regulation?

Re: Re: In light of this failure, what's your solution?

Re: In light of this failure, what's your solution?

@OOTB

Numbnut, this really is not a regulatory issue. It is a government corruption issue. They don't just say we will take a tax break for promising this. Someone had to write and sign a contract somewhere for that to happen.

Re: In light of this failure, what's your solution?

Less regulation in this case would have meant a more even playing field between Verizon and others i.e. increase competition. It's telling that even when faced with a rather clear-cut example of cronyism you think increased government involvement is the answer. Do you have anything but snark to advise for fixing problems with cronyism?

Re: Re: Re: In light of this failure, what's your solution?

Yes by less regulation I mean eliminating the regulations and corporate welfare that act as barriers to entry for competing firms.

In many markets? Name two.

The reason the regulation we have tends to be absolutely terrible is because consolidated power doesn't fix an over-consolidation of power. Cronyism is the natural result of any centralized oversight where the overseer's continued existence is in no way what-so-ever contingent on their efficacy e.g. government oversight. We are arguing about the quality of regulation: government regulation is of poor quality so we should have less of it.

Re: Re: Re: Re: In light of this failure, what's your solution?

In many markets? Name two

Let me revise my statement. In nearly all markets. An unregulated market will inevitably devolve into a monopoly. As Adam Smith pointed out in Wealth of Nations, it's a natural consequence of the free market: eventually, one company will become so powerful that it will simply buy up or bankrupt any new entrants in the marketplace that pose any real risk to their position.

In the long run, it is impossible to have a free market in the absence of regulation.

Why?

So why did they give all the money before getting anything? They should have given 1/4 of the money and then waited until 25% of the state was covered. Once that happened, they could move on to 50%. Giving 100% of the tax breaks up front for a mere promise was a ridiculously bad idea.

Re: Why?

I disagree. Especially in this case, Verizon is a multi-BILLION dollar company. They should get ZERO dollars until there is results. AND, especially since this is tax payer money, the results should be seen by taxpayers. What good is fiber close to the home? Of course, Verizon believes that we are all stupid anyway, FIOS does not deliver "fiber" speeds to the home, it delivers slightly less speed than Comcast for the same price. Go Figure! They put lots of money into capping technologies so that their fiber delivers less than cable.

Re: Re: Why?

Re: Re: Re: Why?

So let's see, you know how to cuss and make up a strawman ( you know, make up something I never said ) but not address any of the points I stated. So, some more details for you to not talk about and use some more cusswords. I have Comcast service. FIOS is available in my neighborhood. For the same price as I pay for Comcast service, I COULD get FIOS at a slower speed. Both Comcast and FIOS have much faster service levels at much higher prices, but in every case, the FIOS price is higher than the Comcast price at each service level (read that to mean that at every given price point, the FIOS service is slower than then Comcast service). Now, where did you get the 500mbps number from? You were the first to mention that. I never stated anything about the capability or lack there of for the speed capability. What has that got to do with the discussion at all?The discussion was that Verizon is a multi-billion dollar publicly traded company. Why do they need to get billions of dollars of taxpayer money up front, to never actually do what they were supposed to do, as in get FIOS to the taxpayers? If indeed they need to be given taxpayer money to build the infrastructure they are going to own in the end, at least lets make it conditional on actually doing what they were supposed to do, and then give them the money after its done, not before. That is my point and look, I didn't have to use any foul language, sling insults or make things up that weren't part of the conversation or even relevant (except in an NSA kind of way where everything is relevant). Isnt' that amazing?

Re: Re: Why?

Fios can deliver higher speeds than Comcast, they offer different packages depending on region, but in my area there was 100mbps service in 2007, Comcast was nowhere near that speed. Plus Fios is a connection that is only shared with 16-32 people and it doesn't slow down based on neighborhood usage like Comcast often does. Also, the story was about tax breaks, not Verizon getting taxpayer money, they still came up with the substantial amount of capital to build out the fiber network, and that same fiber network also made LTE for Verizon wireless possible.

Re: Re: Why?

FIOS is expensive. Their advertised speeds are much closer to their delivered speeds, however, in my experience as a multi-year customer of both FIOS and comcast. It is expensive though I'll grant that readily.

Re: Why?

Then they would probably have not got the big donations they got, you know the ones we dont hear about becasue they are all legal or hidden in wives accounts , come on you dont expect businessmen to give their wives private account details to investigators do you.

I think the only way to resolve issues like this is for the people to stand up and demand what they have paid for. refuse to pay for any verizon services and protest outside of the mayors private home.

The best would be if they all had to cancel their contracts en mass and start organising other service provider to come in. It is a free market and even getting 10mb across copper is better than supporting these guys.

Damn i am sure there is someone that could go in and get things set-up for broadband across the copper wires and for everyone to move over and pay for it until verizon moved on and sold the fibre due to nobody taking it up, and then they could control their own fibre network.

Re: Why?

While I agree that it was ridiculously stupid to just give the money all up front, doesn't Verizon deserve at least half the blame?

Let's say I pay a contractor to remodel my house. Said contractor promptly disappears with my money without doing any of the promised work. Sure it was stupid of me to pay up front, but let's at least blame the contractor for, ya know, Committing FRAUD and STEALING my money.

I just don't see how in these situations people jump to blame the victim, but somehow completely miss the party riping people off.

Rule #1 to growing the economy, don't listen to Wall Street

-Wall Street tends to like Republicans in the white house more then democrats. Yet the stock market and economy have historically done better when a democrat is in the white house.

-Wall Street largely supported SOPA which would have had serious negative consequences to the economy as a whole, especially the tech and web industry.

-Wall Street usually opposes most new regulations on the environment, even though studies show most of those regulations help the economy, because it stops pollution, less pollution means less people get sick from pollution.

-Wall Street's greed helped engineer the great recession, some of them may have gotten even richer, but the rest of us and the economy as a whole took a massive hit.

Re: Rule #1 to growing the economy, don't listen to Wall Street

My favorite part was when you blamed the recession on nebulous 'wall street' even though the fault clearly lies with government back mortgage underwriters and the government controlled FED. Any pop-economic platitude you want to lay on us?

I can't REALLY blame Verizon

I live in a housing community that does not and CANNOT get Verizon FIOS unless EVERY person in the community agrees so that Verizon can dig up some part of the place and lay their fiber.

The reason is that the housing community - specifically the BUILDER - made a deal with the other big cable company that they would be the only one. So only that company has access to the existing fiber.

I'm sure Verizon WANTS to get in... but they can't without getting agreement from everyone in the community.

Re: I can't REALLY blame Verizon

Many builders do that to get the cash for a contract to not put in a rival. However; in most of the US easements are written into every real property deed to allow access for public utilities. FIOS qualifies as a public utility. Since the builder no longer owns any of the property, that agreement can't stop them from wiring up the community. With one exception, when they write that type of agreement in another community, they don't want the cable company to violate it, so they have a secret handshake agreement to honor those types of contracts. Get a couple of neighbors together and file a lawsuit and especially important, make noise, get the TV news and newspapers to comment on it. Then quickly and quietly, FIOS will show up in your neighborhood to stop the noise about these secret handshake agreements. Maybe if it actually gets to court, the judge will file a ruling that these types of contracts are illegal and it will help the many other neighborhoods where these types of deals have been made by builders that restricts consumer choice.

Much of the blame I've heard regarding Verizon tends to be pointed at Lowell Mcadam, formerly the CEO of Verizon Wireless (it's a separate company; a joint operation with Vodafone). In short, his agenda has been giving negative fucks about the wireline infrastructure, and trying to make a grab for Vodafone's share in Verizon Wireless. Sometime I want to watch Vodafone yank their share right out of his hands, just to see him stare at his board of directors like a deer in headlights.

I'm not saying Verizon has ever been a company with a heart of gold, but in comparison, Ivan Seidenberg (the previous CEO) was pretty awesome. He worked his way up to CEO from being an entry-level lineman. I think the FiOS program started under him too.

Response to: Anonymous Coward on Oct 17th, 2013 @ 2:00pm

Verizon bought out Vodafone's share of the company, VZW is wholly owned by Verizon Communications now. You're right about Lowell though, VZ sold off a bunch of the wireline business to Frontier Communications to gain capital for the LTE buildout. The fiber network was mostly in place, they just needed to connect it to the cell sites and voila, 4G.Comcast actually sold them a bunch of their dark fiber to help with that.

Verizon's neglegence of their fiber and copper infrastructure goes deeper than just broadband. I wrote some comments about why the wired phone infrastructure deserves our attention as well a while back. http://pastie.org/8402904

What should happen next -- hold them accountable

As the person who was quoted in the 1994 article, the fact is that Verizon and AT&T have been able to game the regulatory system and it's time to stand up to them once and for all.

In New Jersey, Verizon was to have 100% of the state completed by 2010 with a fiber optic service capable of 45 Mbps in both directions -- Not Fios but a replacement of the old copper utility wire.

We're starting a new campaign to take them on... and it's time to do this in every state as in almost every state they collected billions of dollars for the upgrades... and it continues as the price of service and even the cell service *(as the cell towers are all connected to a wire) have been able to simply charge customers

Re: What should happen next -- hold them accountable

Bruce K,

This is uncanny. I was surprised to see you commenting here. since I thought you wrote this gem of an article. You've been pounding the table over these same issues ever since I met you back in the Nineties..